A MESSAGE TO SHAREHOLDERS
The first half of 2000 has been an interesting ride for the four portfolios that
make up the Principal Special Markets Fund, Inc. It appears the economy is
finally slowing down, following its record expansion. To help you better
understand the Principal Special Markets Fund, Inc. we've gathered some thoughts
from the portfolio managers.
Marty Schafer, Mortgage-Backed Securities Portfolio
The first quarter of 2000 had explosive growth. In response to this growth, the
Federal Reserve raised interest rates numerous times in an effort to contain
potential inflation. We believe that the slower growth in the economy or a stock
market slide may trigger a bond rally. Therefore, we have chosen to leave our
holdings the same.
Scott Opsal and Kurt Spieler, International Securities Portfolio
The international markets corrected in the second quarter as technology stocks
fell back into reality compared to the high extremes of the first quarter. Our
portfolio outperformed the benchmark due to our superior selection of
securities. In an effort to combat lower returns, we have become increasingly
alert to changes in prices and interest rates and are acting more quickly on
market changes.
Kurt Spieler, Principal International Emerging Markets Portfolio
Our second quarter returns were not as strong as the first quarter's due to our
securities falling back in line with the market. The lowered return in our
portfolio was caused by falling prices in the global telecom and commodity stock
industries. We are following a strategy similar to the International Securities
Portfolio and are closely monitoring our stocks.
Dan Sherman and Darren Sleister, Principal International SmallCap Portfolio
This spring the market was on a roller coaster ride. At one point the NASDAQ
dropped 60% from its high this year. Value stocks were the winners over growth
stocks in almost every industry during the second quarter. Some of the best
opportunities for high returns are in the Internet, mobile communications,
optical transmission, biotechnology, and outsourcing industries.
All the managers keep abreast of the markets and adjust accordingly throughout
the year. You can be assured that we are superbly positioned to offer you the
best services and returns possible.
The NASDAQ Index is a market-weighted index of all common stocks listed on the
National Association of Securities Dealers Automated Quotation system.
Investment cannot be made directly into an index.
International investing involves risks including exchange rates, and political,
financial and economic events and conditions of the countries in which the fund
invests. These countries may also have less stringent accounting and disclosure
requirements than those of the U.S.
CONTENTS
Page
Financial Statements and Highlights
Statements of Assets and Liabilities................. 4
Statements of Operations ............................ 6
Statements of Changes in Net Assets.................. 8
Notes to Financial Statements........................ 10
Schedules of Investments
International Emerging Markets Portfolio......... 16
International Securities Portfolio............... 19
International SmallCap Portfolio................. 21
Mortgage-Backed Securities Portfolio............. 24
Financial Highlights................................. 26
June 30, 2000
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
PRINCIPAL SPECIAL MARKETS FUND, INC.
International International
Emerging Markets Securities
Portfolio Portfolio
<S> <C> <C>
Investment in securities -- at cost.............................. $ 104,648,732 $48,921,154
Assets
Investment in securities -- at value (Note 4).................... $121,298,041 $57,967,447
Cash............................................................. 1,036,674 227,346
Receivables:
Dividends and interest........................................ 171,575 165,288
Investment securities sold.................................... 200,791 963,723
Other assets..................................................... -- 109
Total Assets 122,707,081 59,323,913
Liabilities
Accrued expenses................................................. 11,392 4,234
Payables:
Investment securities purchased............................... 874,378 1,364,170
Foreign currency contract..................................... -- --
Total Liabilities 885,770 1,368,404
Net Assets Applicable to Outstanding Shares ................... $121,821,311 $57,955,509
Net Assets Consist of:
Capital Stock.................................................... $98,486 $34,422
Additional paid-in capital....................................... 100,434,901 44,473,314
Accumulated undistributed (overdistributed)
net investment income......................................... (1,415,411) 248,330
Accumulated undistributed net realized gain (loss) from
investment and foreign currency transactions.................. 6,055,052 4,149,153
Net unrealized appreciation (depreciation) of investments........ 16,649,309 9,046,293
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies.................. (1,026) 3,997
Total Net Assets $121,821,311 $57,955,509
Capital Stock (par value: $.01 a share):
Shares authorized................................................ 100,000,000 100,000,000
Shares issued and outstanding.................................... 9,848,581 3,442,165
Net Asset Value Per Share ...................................... $12.37 $16.84
</TABLE>
<TABLE>
<CAPTION>
International Mortgage-Backed
SmallCap Securities
Portfolio Portfolio
<S> <C> <C>
Investment in securities -- at cost.............................. $148,859,611 $5,488,114
Assets
Investment in securities -- at value (Note 4).................... $157,694,419 $5,386,898
Cash............................................................. 1,768,740 10,225
Receivables:
Dividends and interest........................................ 168,444 26,972
Investment securities sold.................................... 2,849,493 --
Other assets..................................................... -- 127
Total Assets 162,481,096 5,424,222
Liabilities
Accrued expenses................................................. 12,622 191
Payables:
Investment securities purchased............................... 7,080,826 201,188
Foreign currency contract..................................... 310,281 --
Total Liabilities 7,403,729 201,379
Net Assets Applicable to Outstanding Shares ................... $155,077,367 $5,222,843
Net Assets Consist of:
Capital Stock.................................................... $90,572 $5,330
Additional paid-in capital....................................... 109,244,262 6,527,576
Accumulated undistributed (overdistributed)
net investment income......................................... 245,322 --
Accumulated undistributed net realized gain (loss) from
investment and foreign currency transactions.................. 36,658,437 (1,208,847)
Net unrealized appreciation (depreciation) of investments........ 8,834,808 (101,216)
Net unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies.................. 3,966 --
Total Net Assets $155,077,367 $ 5,222,843
Capital Stock (par value: $.01 a share):
Shares authorized................................................ 100,000,000 100,000,000
Shares issued and outstanding.................................... 9,057,151 532,981
Net Asset Value Per Share ...................................... $17.12 $9.80
</TABLE>
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(unaudited)
PRINCIPAL SPECIAL MARKETS FUND, INC.
International International
Emerging Markets Securities
Portfolio Portfolio
Net Investment Income
Income:
<S> <C> <C>
Dividends....................................................... $ 1,041,682 $ 627,308
Withholding tax on foreign dividends............................ (90,127) (53,159)
Interest........................................................ 111,714 77,675
Total Income 1,063,269 651,824
Expenses:
Management and investment advisory fees (Note 3) .......... 726,385 262,870
Net Investment Income 336,884 388,954
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currencies Net realized gain (loss) from:
Investment transactions......................................... 10,180,515 4,742,635
Foreign currency transactions................................... (73,430) (19,083)
Change in unrealized appreciation/depreciation of:
Investments..................................................... (18,064,428) (4,294,629)
Translation of assets and liabilities in foreign currencies..... (5,896) 6,606
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies (7,963,239) 435,529
Net Increase (Decrease) in Net Assets
Resulting from Operations $ (7,626,355) $ 824,483
</TABLE>
See accompanyng notes.
<TABLE>
<CAPTION>
International Mortgage-Backed
SmallCap Securities
Portfolio Portfolio
Net Investment Income
Income:
<S> <C> <C>
Dividends....................................................... $861,673 $ --
Withholding tax on foreign dividends............................ (98,448) --
Interest........................................................ 345,026 181,585
Total Income 1,108,251 181,585
Expenses:
Management and investment advisory fees (Note 3) .......... 823,865 11,226
Net Investment Income 284,386 170,359
Net Realized and Unrealized Gain (Loss) on Investments and Foreign
Currencies Net realized gain (loss) from:
Investment transactions......................................... 36,658,750 (5,591)
Foreign currency transactions................................... (39,064) --
Change in unrealized appreciation/depreciation of:
Investments..................................................... (36,724,757) 13,231
Translation of assets and liabilities in foreign currencies..... 6,315 --
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign Currencies (98,756) 7,640
Net Increase (Decrease) in Net Assets
Resulting from Operations $185,630 $177,999
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited)
PRINCIPAL SPECIAL MARKETS FUND, INC.
<TABLE>
<CAPTION>
International International
Emerging Markets Securities
Portfolio Portfolio
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, December 31, June 30, December 31,
2000 1999 2000 1999
Operations
<S> <C> <C> <C> <C>
Net investment income (operating loss) .......................... $336,884 $893,349 $388,954 $1,409,932
Net realized gain (loss) from investment and foreign
currency transactions......................................... 10,107,085 1,669,466 4,723,552 4,511,453
Change in unrealized appreciation/depreciation of investments
and translation of assets and liabilities in foreign currencies (18,070,324) 47,792,384 (4,288,023) 7,453,875
Net Increase (Decrease) in Net Assets
Resulting from Operations (7,626,355) 50,355,199 824,483 13,375,260
Dividends and Distributions to Shareholders
From net investment income....................................... (828,774) (933,589) (100,549) (1,393,762)
Excess distribution of net investment income..................... -- (733,291) -- --
From net realized gain on investments and foreign
currency transactions......................................... -- -- -- (5,607,324)
Excess distribution from net realized gain on investments
and foreign currency transactions............................. -- -- -- (662,686)
Total Dividends and Distributions (828,774) (1,666,880) (100,549) (7,663,772)
Capital Share Transactions (Note 5)
Shares sold...................................................... -- -- 640,575 3,943,130
Shares issued in reinvestment of dividends
and distributions............................................. 701,753 1,405,858 66,638 4,961,789
Shares redeemed.................................................. -- -- (4,816,604) (1,187,600)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 701,753 1,405,858 (4,109,391) 7,717,319
Total Increase (Decrease) (7,753,376) 50,094,177 (3,385,457) 13,428,807
Net Assets
Beginning of period ............................................. 129,574,687 79,480,510 61,340,966 47,912,159
End of period [including undistributed (overdistributed)
net investment income as set forth below]..................... $121,821,311 $129,574,687 $57,955,509 $61,340,966
Undistributed (Overdistributed) Net Investment Income ....... $(1,415,411) $(850,091) $248,330 $(20,992)
</TABLE>
<TABLE>
<CAPTION>
International Mortgage-Backed
SmallCap Securities
Portfolio Portfolio
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, December 31, June 30, December 31,
2000 1999 2000 1999
Operations
<S> <C> <C> <C> <C>
Net investment income (operating loss) .......................... $ 284,386 $(57,776) $170,359 $598,198
Net realized gain (loss) from investment and foreign
currency transactions......................................... 36,619,686 24,982,973 (5,591) (127,241)
Change in unrealized appreciation/depreciation of investments
and translation of assets and liabilities in foreign currencies (36,718,442) 46,637,108 13,231 (586,658)
Net Increase (Decrease) in Net Assets
Resulting from Operations 185,630 71,562,305 177,999 (115,701)
Dividends and Distributions to Shareholders
From net investment income....................................... -- -- (170,359) (598,198)
Excess distribution of net investment income..................... -- (6,027) -- --
From net realized gain on investments and foreign
currency transactions......................................... (15,438,070) (11,206,022) -- --
Excess distribution from net realized gain on investments
and foreign currency transactions............................. -- -- -- --
Total Dividends and Distributions (15,438,070) (11,212,049) (170,359) (598,198)
Capital Share Transactions (Note 5)
Shares sold...................................................... -- -- -- --
Shares issued in reinvestment of dividends
and distributions............................................. 15,437,645 11,212,049 170,359 598,201
Shares redeemed.................................................. -- -- -- (9,700,000)
Net Increase (Decrease) in Net Assets
from Capital Share Transactions 15,437,645 11,212,049 170,359 (9,101,799)
Total Increase (Decrease) 185,205 71,562,305 177,999 (9,815,698)
Net Assets
Beginning of period ............................................. 154,892,162 83,329,857 5,044,844 14,860,542
End of period [including undistributed (overdistributed)
net investment income as set forth below]..................... $155,077,367 $154,892,162 $5,222,843 $5,044,844
Undistributed (Overdistributed) Net Investment Income ....... $245,322 $-- $-- $--
</TABLE>
See accompanying notes.
(unaudited)
Principal Special Markets Fund, Inc.
Note 1 -- Significant Accounting Policies
Principal Special Markets Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as an open-end diversified
management investment company and operates in the mutual fund industry. The Fund
currently consists of four portfolios (International Emerging Markets Portfolio,
International Securities Portfolio, International SmallCap Portfolio and
Mortgage-Backed Securities Portfolio) (known as the "Portfolios").
The Portfolios value securities for which market quotations are readily
available at market value, which is determined using the last reported sale
price or, if no sales are reported, as is regularly the case for some securities
traded over-the-counter, the last reported bid price. When reliable market
quotations are not considered to be readily available, which may be the case,
for example, with respect to certain debt securities, preferred stocks and
foreign securities, the investments are valued by using prices provided by
market makers or estimates of market values obtained from yield data and other
factors relating to instruments or securities with similar characteristics in
accordance with procedures established in good faith by the Fund's Board of
Directors. Securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange. The values of
such securities used in computing net asset value per share are usually
determined as of such times. Occasionally, events which affect the values of
such securities and foreign currency exchange rates may occur between the times
at which they are generally determined and the close of the New York Stock
Exchange and would therefore not be reflected in the computation of each
portfolio's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities are valued at their
fair value as determined in good faith by Principal Management Corporation (the
"Manager") under procedures established and regularly reviewed by the Fund's
Board of Directors. To the extent each portfolio invests in foreign securities
listed on foreign exchanges which trade on days on which a portfolio does not
determine its net asset value, for example Saturdays and other customary
national U.S. holidays, each portfolio's net asset value could be significantly
affected on days when shareholders do not have access to the portfolio.
Certain securities issued by companies in emerging market countries may have
more than one quoted valuation at any given point in time, sometimes referred to
as a "local" price and a "premium" price. The premium price is often a
negotiated price which may not consistently represent a price at which a
specific transaction can be effected. It is the policy of the International
Emerging Markets, International Securities and International SmallCap Portfolios
to value such securities at prices at which it is expected those shares may be
sold, and the Manager or any sub-advisor is authorized to make such
determinations subject to such oversight by the Fund's Board of Directors as may
occasionally be necessary.
The value of foreign securities in foreign currency amounts is expressed in U.S.
dollars at the closing daily rate of exchange. The identified cost of the
portfolio holdings is translated at approximate rates prevailing when acquired.
Income and expense amounts are translated at approximate rates prevailing when
received or paid, with daily accruals of such amounts reported at approximate
rates prevailing at the date of valuation. Since the carrying amount of the
foreign securities is determined based on the exchange rate and market values at
the close of the period, it is not practicable to isolate that portion of the
results of operations arising as a result of changes in the foreign exchange
rates from the fluctuations arising from changes in the market prices of
securities during the period.
The Portfolios record investment transactions generally one day after the trade
date, except for short-term investment transactions, which are recorded
generally on the trade date. The identified cost basis has been used in
determining the net realized gain or loss from investment transactions and
unrealized appreciation or depreciation of investments. The Portfolios record
dividend income on the ex-dividend date, except dividend income from foreign
securities whereby the ex-dividend date has passed; such dividends are recorded
as soon as the Portfolios are informed of the ex-dividend date. Interest income
is recognized on an accrual basis.
Net realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between trade and settlement dates
on security transactions, and the difference between the amount of dividends and
foreign withholding taxes recorded on the books and the U.S. dollar equivalent
of the amounts actually received or paid. Net unrealized appreciation or
depreciation on translation of assets and liabilities in foreign currencies
arise from changes in the exchange rate relating to assets and liabilities,
other than investments in securities, purchased and held in non-U.S. denominated
currencies.
The Portfolios may, pursuant to an exemptive order issued by the Securities and
Exchange Commission, transfer uninvested funds into a joint trading account. The
order permits the Portfolios' cash balances to be deposited into a single joint
account along with the cash of other registered investment companies managed by
Principal Management Corporation. These balances may be invested in one or more
short-term instruments.
With respect to the Mortgage-Backed Securities Portfolio, all net investment
income is declared as a dividend daily to shareholders of record as of that day,
and all distributions of realized gains from investment transactions are
recorded on the ex-dividend date. Dividends and distributions to shareholders of
the other portfolios are recorded on the ex-dividend date.
Dividends and distributions to shareholders from net investment income and net
realized gain from investments and foreign currency transactions are determined
in accordance with federal tax regulations, which may differ from generally
accepted accounting principles. Permanent book and tax basis differences are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification.
Reclassifications made for the International Emerging Markets Portfolio and
International SmallCap Portfolio for the period ended December 31, 1999
aggregated $179,291 and $481,340, respectively. Other reclassifications made for
the years ended December 31, 1999 were not material.
Dividends and distributions which exceed net investment income and net realized
capital gains for financial reporting purposes, but not for tax purposes, are
reported as dividends in excess of net investment income or distributions in
excess of net realized capital gains. To the extent distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as tax return of capital distributions.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 -- Federal Income Taxes
No provision for federal income taxes is considered necessary because each
portfolio is qualified as a "regulated investment company" under the Internal
Revenue Code and intends to distribute each year substantially all of its net
investment income and realized capital gains to shareholders. The cost of
investments for federal income tax reporting purposes approximates that used for
financial reporting purposes.
Note 3 -- Management Agreement and Transactions With Affiliates
The Fund has agreed to pay investment advisory and management fees, computed at
an annual percentage rate of each portfolio's average daily net assets, to
Principal Management Corporation and to Invista Capital Management, LLC
("Invista"). Principal Management Corporation is wholly owned by Princor
Financial Services Corporation, a subsidiary of Principal Financial Services,
Inc. Invista is an indirect wholly owned subsidiary of Principal Life Insurance
Company. Pursuant to a sub-advisory agreement, Invista has agreed to provide
investment advisory services in return for the advisory fee paid by the Fund and
to reimburse the Manager for the other costs it incurs under the management
agreement. The annual rate used in this calculation for the Portfolios is as
follows:
Net Asset Value of Portfolio
(in millions)
--------------------------------------------------------------------------------
First Next Over
$250 $250 $500
International Emerging Markets Portfolio 1.15% 1.05% .95%
International Securities Portfolio .90 .90 .90
International SmallCap Portfolio 1.00 .90 .80
Mortgage-Backed Securities Portfolio .45 .45 .45
No brokerage commissions were paid by the Fund to Princor Financial Services
Corporation during the periods. Brokerage commissions were paid to other
affiliates by the following portfolios:
Period Year
Ended Ended
June 30, December 31,
2000 1999
International Emerging Markets Portfolio $44,649 $69,761
International Securities Portfolio 49,684 33,250
International SmallCap Portfolio 37,137 178,716
At June 30, 2000, Principal Life Insurance Company owned shares of the Fund's
portfolios as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
International Emerging Markets Portfolio 8,229,020 International SmallCap Portfolio 8,935,495
International Securities Portfolio 1,604,443 Mortgage-Backed Securities Portfolio 532,981
</TABLE>
Note 4 -- Investment Transactions
For the period ended June 30, 2000, the cost of investment securities purchased
and proceeds from investment securities sold (not including short-term
investments and U.S. government securities) by the Portfolios were as follows:
Purchases Sales
International Emerging Markets Portfolio $78,103,799 $80,581,909
International Securities Portfolio 29,334,055 35,258,853
International SmallCap Portfolio 278,183,908 287,296,234
Mortgage-Backed Securities Portfolio 573,182 353,401
At June 30, 2000, net unrealized appreciation (depreciation) of investments by
the Portfolios was composed of the following:
<TABLE>
<CAPTION>
Net Unrealized
Gross Unrealized Appreciation (Depreciation)
Appreciation (Depreciation) of Investments
<S> <C> <C> <C>
International Emerging Markets Portfolio $22,643,687 $(5,994,378) $16,649,309
International Securities Portfolio 11,855,856 (2,809,563) 9,046,293
International SmallCap Portfolio 19,045,771 (10,210,963) 8,834,808
Mortgage-Backed Securities Portfolio 18,797 (120,013) (101,216)
</TABLE>
The Mortgage-Backed Securities Portfolio may trade portfolio securities on a
"to-be-announced" (TBA) basis. In a TBA transaction, the portfolio commits to
purchase or sell securities for which all specific information is not known at
the time of the trade. Securities purchased on a TBA basis are not settled until
they are delivered to the portfolio, normally 15 to 30 days later. These
transactions are subject to market fluctuations and their current value is
determined in the same manner as for other portfolio securities. As of June 30,
2000, Mortgage-Backed Securities Portfolio had a TBA purchase commitment
involving a security with a face amount of $200,000, cost of $201,188 and a
market value of $200,892. The portfolio has set aside investment securities and
other assets in excess of the commitment to serve as collateral.
At June 30, 2000, the Portfolios held the following securities which were
purchased in private placement transactions and may require registration, or an
exemption therefrom, in order to effect a sale in the ordinary course of
business.
<TABLE>
<CAPTION>
Value at Value as a
Date of June 30, Percentage of
Security Description Acquisition Cost 2000 Net Assets
International Emerging Markets Portfolio
<S> <C> <C> <C> <C>
Agora SA GDR 2/23/99 $209,954 $596,805 0.49%
Al-Ahram Beverages Co. ADR 2/4/98 194,250 240,450 0.20
2/13/98 8,775 10,305 0.01
11/6/98 249,546 291,975 0.24
11/25/98 29,750 34,350 0.03
12/14/98 158,600 209,535 0.17
3/19/99 240,375 257,625 0.21
4/1/99 301,740 322,890 0.27
8/20/99 108,850 120,225 0.10
Ceske Radiokomunikace GDR 6/12/98 231,886 628,924 0.52
3/23/00 250,040 208,164 0.17
Hindalco Industries Ltd. GDR 5/6/99 262,255 263,387 0.22
5/19/99 180,125 194,447 0.16
6/3/99 230,140 261,620 0.21
3/31/00 361,418 353,540 0.29
Mol Magyar Olaj-es Gazipari Rt. ADR 9/23/98 63,580 47,063 0.04
6/16/99 375,750 207,630 0.17
7/2/99 196,219 110,736 0.09
1/27/00 308,875 193,788 0.16
State Bank of India GDR 5/5/99 473,000 445,900 0.37
5/6/99 448,525 390,163 0.32
5/20/99 47,580 39,523 0.03
3/31/00 368,150 374,962 0.31
5/25/00 54,450 66,885 0.05
Videsh Sanchar Nigam Ltd. GDR 1/13/98 24,970 34,376 0.03
3/20/98 83,650 109,375 0.09
4/30/98 123,750 156,250 0.13
5/8/98 67,770 84,375 0.07
7/30/98 65,250 93,750 0.08
2/11/99 210,900 356,250 0.29
5/20/99 95,600 125,000 0.10
3/1/00 168,775 67,187 0.06
4/18/00 190,350 140,625 0.12
$7,038,080 5.80%
</TABLE>
The Mortgage-Backed Securities Portfolio's investments are with various issuers;
the other portfolios' investments are with various issuers in various
industries. The Schedules of Investments contained herein summarize
concentrations of credit risk for Mortgage-Backed Securities Portfolio by
issuers and the other portfolios by industry and issuer.
Note 5 -- Capital Share Transactions
Transactions in Capital Shares by portfolio were as follows:
<TABLE>
<CAPTION>
International International International Mortgage-Backed
Emerging Securities SmallCap Securities
Markets Portfolio Portfolio Portfolio Portfolio
Period Ended June 30, 2000:
<S> <C> <C> <C> <C>
Shares sold ................................. -- 38,282 -- --
Shares issued in reinvestment of
dividends and distributions .................. 52,195 4,129 834,040 17,550
Shares redeemed ............................. -- (286,389) -- --
Net Increase (Decrease) 52,195 (243,978) 834,040 17,550
Year Ended December 31, 1999:
Shares sold ................................... -- 235,392 -- --
Shares issued in reinvestment of
dividends and distributions ................... 112,935 313,912 689,328 59,088
Shares redeemed ............................... -- (78,360) -- (973,483)
Net Increase (Decrease) 112,935 470,944 689,328 (914,395)
</TABLE>
Note 6 -- Line of Credit
The Portfolios participate with other funds and accounts managed by Principal
Management Corporation in an unsecured joint line of credit with two banks which
allows the portfolios to borrow up to $75,000,000, collectively. Borrowings are
made solely to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Interest is charged to each participant, based on
its borrowings, at a rate equal to the Fed Funds Rate plus .50%. Additionally, a
commitment fee is charged at the annual rate of .09% on the average unused
portion of the line of credit. The commitment fee is allocated among the
participating funds, accounts and portfolios in proportion to their average net
assets during each quarter. At June 30, 2000, the Portfolios had no outstanding
borrowings under the line of credit.
June 30, 2000
SCHEDULES OF INVESTMENTS
PRINCIPAL SPECIAL MARKETS FUND, INC.
International Emerging Markets Portfolio
Shares
Held Value
Common Stocks (90.55%)
Advertising (1.35%)
Cheil Communications, Inc. 12,600 $ 1,644,178
Beer, Wine & Distilled Beverages (2.29%)
Hite Brewery Co. 45,892 2,016,733
South African Breweries Ltd. 103,982 776,057
---------
2,792,790
Beverages (4.21%)
Al-Ahram Beverages Co. ADR 86,600(a)(b) 1,487,355
Beijing Enterprises Holdings, Ltd. 258,000 304,491
Cia Cervejaria Brahma-SP ADR 20,300 345,100
Fomento Economico Mexicano SA ADR 35,250(a) 1,517,953
Grupo Modelo SA De C.V. 538,000 1,205,189
PanAmerican Beverages, Inc. ADR 18,100 270,369
---------
5,130,457
Blast Furnace & Basic Steel
Products (1.55%)
Pohang Iron & Steel Co. Ltd. ADR 54,000 1,296,000
Tubos De Acero De Mexico SA ADR 42,700 592,463
---------
1,888,463
Business Credit Institution (0.50%)
Cosco Pacific Ltd. 778,000 613,793
Cable & Other Pay TV Services (0.69%)
Ceske Radiokomunikace GDR 18,900(a)(b) 837,088
Combination Utility Services (0.80%)
Tenaga Nasional Berhad 300,000 979,076
Commercial Banks (9.26%)
ABSA Group Ltd. 1 2
Alpha Bank SA 21,600 857,132
Banco Rio De La Plata SA ADR 47,400 693,225
Bank Hapoalim Ltd. 647,300 1,877,106
Bank Sinopac 1,211,330(a) 778,738
Bank Slaski SA W Katowicach 12,379 666,585
BOE Ltd. 1,651,000 937,546
Grupo Financiero Banamex 316,900(a) 1,352,184
H&CB GDR 55,900 1,308,482
ICICI Bank Ltd. 27,950(a) 405,275
Overseas Union Bank Ltd. 144,320 559,250
RMB Holdings Ltd. 1 1
Shinhan Bank 55,500 522,634
State Bank of India GDR 130,000(b) 1,317,433
----------
11,275,593
Communications Equipment (1.80%)
Comverse Technology, Inc. 11,400 1,060,200
Netas Northern Electric
Telekomunikasyon AS 10,151,000 1,130,657
---------
2,190,857
Communications Services, NEC (1.36%)
Korea Telecom Corp. ADR 34,200 1,654,425
Computer & Data Processing (3.54%)
Check Point Software Technologies Ltd. 7,700(a) $ 1,630,475
Datatec Ltd. 111,500(a) 769,672
Infosys Technologies Ltd. 8,584 1,598,500
Oridion Systems Ltd. 11,760(a) 311,707
---------
4,310,354
Computer & Office Equipment (4.23%)
Asustek Computer, Inc. 224,400 1,850,632
Compal Electronics, Inc. 747,365 1,832,074
Orbotech Ltd. ADR 8,450(a) 784,794
Trigem Computer, Inc. 34,198 685,478
---------
5,152,978
Concrete, Gypsum & Plaster
Products (1.05%)
Cemex SA CPO 275,086 1,282,760
Consumer Products (0.49%)
British American Tobacco BHD 72,500 591,525
Crude Petroleum & Natural Gas (0.46%)
Mol Magyar Olaj-es Gazipari Rt. ADR 40,400(b) 559,217
Deep Sea Domestic
Transportation (0.24%)
China Shipping Development Co. Ltd.,
Class H 1,576,000(a) 287,086
Drugs (0.18%)
Ranbaxy Laboratories Ltd. GDR 13,300 216,125
Electric Services (3.38%)
Companhia Paranaense De Enersis ADR 158,900 1,479,756
Korea Electric Power Corp. ADR 115,400 2,127,688
Rao Unified Energy Systems ADR 44,000 506,000
---------
4,113,444
Electronic & Other Electronic (0.24%)
Procomp Informatics Co., Ltd. 57,680(a) 297,773
Electronic Components &
Accessories (11.40%)
Acer Peripherals, Inc. 404,592 1,142,878
Ambit Microsystems Corp. 88,000 871,457
Samsung Electronics 13,100 4,335,239
Taiwan Semiconductor Manufacturing Co. 614,400(a) 2,912,511
Unisem (M) Berhad 129,000 916,700
United Microelectronics 954,000 2,648,366
Via Technologies, Inc. 34,000(a) 524,368
Winbond Electronics Corp. 187,000(a) 540,375
----------
13,891,894
Electronic Distribution
Equipment (0.22%)
Reltek Semiconductor Corp. 32,000(a) 267,022
Family Clothing Stores (1.03%)
Giordano International Ltd. 822,000 1,249,561
Fire, Marine & Casualty
Insurance (0.90%)
Aksigorta AS 55,434,000 1,096,188
Foreign Bank & Branches &
Agencies (1.60%)
Credicorp Ltd ADR 52,981 476,829
Yapi Ve Kredi Bankasi AS 131,849,322 1,468,588
---------
1,945,417
Furniture & Home Furnishing
Stores (0.90%)
Grupo Elektra SA CPO 1,097,700 $1,101,805
Gasoline Service Stations (0.97%)
President Chain Store Corp. 315,000 1,176,175
Holding Offices (1.60%)
The India Fund, Inc. ADR 137,000(a) 1,943,688
Hotels & Motels (0.79%)
Resorts World Berhad 352,000 963,495
Medical & Dental Laboratories (0.93%)
Ranbaxy Laboratories Ltd. 88,000 1,135,840
Medical Instruments & Supplies (0.49%)
Medison Co. Ltd. 54,400 592,776
Metal Mining Services (0.71%)
Compahia Vale Do Rio Doce 30,642(a) 862,892
Miscellaneous Business Services (0.25%)
TelecomAsia Corp. Public Co., Ltd. 278,000(a) 308,308
Miscellaneous Converted Personal
Services (0.21%)
Kimberly-Clark De Mexico-A 92,100 260,585
Miscellaneous Investing (1.85%)
Banco Latino Americano De
Exportaciones (Bladex) ADR 35,701 988,471
Johnnic Holdings Ltd. 92,300 1,266,104
---------
2,254,575
Miscellaneous Textile Goods (0.88%)
Esprit Holdings Ltd. 1,028,000 1,068,182
Newspapers (0.75%)
Agora SA GDR 22,600(b) 596,805
New Straight Times Press Berhad 135,000 319,779
--------
916,584
Oil & Gas Field Services (1.60%)
Gulf Indonesia Resources Ltd. ADR 118,600(a) 948,800
Surgutneftegas SP ADR 75,900 996,188
-------
1,944,988
Paper & Paper Products (0.79%)
Aracruz Celulose SA ADR 49,500 955,969
Paper Mills (0.47%)
Sappi Ltd. 37,800 284,346
Sappi Ltd. ADR 38,700 285,413
-------
569,759
Petroleum Refining (1.77%)
Sasol Ltd. 321,000 2,154,275
Primary Non-Ferrous Metals (0.88%)
Hindalco Industries Ltd. GDR 60,700(b) 1,072,994
Producers, Orchestras, &
Entertainers (0.98%)
Corp Interamericana De
Entretenimiento SA, Class B 300,900(a) 1,198,319
Radio & Television Broadcasting (1.14%)
Grupo Televisa SA GDR 20,109(a) $1,386,264
Real Estate Agents & Managers (0.83%)
Cheung Kong 92,000 1,017,921
Real Estate Operators & Lessors (0.27%)
SM Prime Holdings, Inc. 2,740,000 329,596
Savings Institutions (0.71%)
ICICI Ltd. 250,000 702,054
ICICI Ltd. ADR 8,800 165,000
-------
867,054
Services To Buildings (0.00%)
Opicom Co., Ltd. 1(a) 16
Telegraph & Other
Communications (0.30%)
Advanced Info Service- For Rg 29,600(a) 368,267
Telephone Communication (15.94%)
Carso Global Telecom, Class A1 236,200(a) 671,896
China Telecom Ltd. 284,000(a) 2,504,714
China Unicom - ADR 42,413(a) 901,276
Cia Anonima Telefonos De
Venezuela-ADR 35,900 976,031
Digi Com Berhad 167,000(a) 305,474
Embratel Participacoes SA 89,200,000 1,621,863
Embratel Participacoes SA ADR 41,400 978,075
Hellenic Telecommunication
Organization 60,589 1,484,471
Hellenic Telecommunication
Organization SA ADR 65,200 794,625
Matav Tavkozlesi Rt. ADR 31,300 1,077,894
Mobilnil-Egypt Mobile Phone 14,300(a) 470,957
Netia Holdings ADR 9,900(a) 267,300
Partner Communications Co. Ltd. ADR 75,300(a) 715,350
SK Telecom Co., Ltd. 52,100 1,891,881
Telefonos De Mexico SA ADR 47,500 2,713,438
Telecomunicacoes Brasileiras SA 17,190,000(a) 286
Tele Norte Leste
Participacoes SA (Telemar) 45,760,000 874,893
Videsh Sanchar Nigam Ltd. GDR 74,700(b) 1,167,188
----------
19,417,612
Variety Stores (0.51%)
Hutchison Whampoa Ltd. 49,500 622,298
Vocational Schools (1.26%)
NIIT Ltd. 31,400(a) 1,540,039
Total Common Stocks 110,298,340
Preferred Stocks (5.66%)
Beverages (0.55%)
Quilmes Industrial Quines SA ADR 60,200 669,725
Commercial Banks (0.91%)
Banco Itau SA Preferred 12,640,000 1,103,578
Gasoline Service Stations (1.78%)
Petroleo Brasileiro SA 72,000 2,175,227
Telephone Communication (2.42%)
Tele Celular Sul Participacoes SA ADR 24,800 $1,122,200
Tele Norte Leste Participacoes ADR 77,483 1,830,540
---------
2,952,740
Total Preferred Stocks 6,901,270
Principal
Amount Value
Commercial Paper (3.36%)
Personal Credit Institutions (3.36%)
Associates First Capital Corp.;
6.89%; 7/3/2000 $4,100,000 $4,098,431
Total Portfolio Investments (99.57%) 121,298,041
Cash, receivables and other assets,
net of liabilities (0.43%) 523,270
Total Net Assets (100.00%) $121,821,311
(a)Non-income producing security-No dividend paid during the last twelve months.
(b)Restricted security - See Note 4 to the financial statements.
International Emerging Markets Portfolio
Investments by Country
Total Percentage of
Country Value Total Value
Argentina $1,362,950 1.12%
Brazil 13,350,378 11.01
China 1,188,362 0.98
Czech Republic 837,089 0.69
Egypt 1,958,312 1.61
Greece 3,136,228 2.59
Hong Kong 7,380,960 6.08
Hungary 1,637,111 1.35
India 11,264,135 9.29
Indonesia 948,800 0.78
Israel 6,379,632 5.26
Korea, Republic Of 18,075,531 14.90
Malaysia 4,076,049 3.36
Mexico 13,553,225 11.17
Panama 988,471 0.82
Peru 476,829 0.39
Philippines 329,596 0.27
Poland 1,530,690 1.26
Russia 1,502,188 1.24
Singapore 559,250 0.46
South Africa 6,473,416 5.34
Taiwan, Province of China 14,842,368 12.24
Thailand 676,575 0.56
Turkey 3,695,434 3.05
United States 4,098,431 3.38
Venezuela 976,031 0.80
------------ ------
Total $121,298,041 100.00%
International Securities Portfolio
Shares
Held Value
Common Stocks (95.45%)
Advertising (1.43%)
Aegis Group PLC 138,600 $408,113
WPP Group PLC 28,900 419,798
--------
827,911
Aircraft & Parts (0.72%)
Rolls-Royce PLC 115,800 414,169
Combination Utility Services (2.92%)
Alcatel Alsthom 25,740 1,695,111
Commercial Banks (9.41%)
Bank of Ireland 105,354 664,018
BNP Paribas 9,640 931,473
Deutsche Bank AG 6,000 503,547
National Australia Bank Ltd. 38,374 642,785
Nordic Baltic Holding AB 159,079 1,206,144
Royal Bank of Canada 10,300 526,585
San Paolo-IMI SPA 29,400 523,913
Sanwa Bank Ltd. 57,000 455,763
---------
5,454,228
Communications Equipment (5.35%)
Ericsson LM, Class B 74,080 1,473,876
Siemens AG 7,400 1,112,271
Sony Corp. 5,500 514,626
---------
3,100,773
Communications Services, NEC (2.23%)
Koninklijke KPN NV 20,808 934,486
Korea Telecom Corp. ADR 7,400 357,975
--------
1,292,461
Computer & Data Processing
Services (1.97%)
Cap Gemini SA 1,912 338,156
Getronics NV 52,020 805,333
---------
1,143,489
Computer & Office Equipment (6.92%)
Canon, Inc. 13,000 648,741
Fujitsu Ltd. 19,000 659,042
NEC Corp. 36,000 1,133,028
Orbotech Ltd. ADR 5,550(a) 515,456
Toshiba Corp. 93,000 1,052,134
---------
4,008,401
Concrete, Gypsum & Plaster
Products (1.37%)
Lafarge SA 5,260 410,433
RMC Group PLC 29,500 384,077
794,510
Crude Petroleum & Natural Gas (2.56%)
Total Fina Elf 9,637 1,483,612
Dairy Products (1.49%)
Koninklijke Numico NV 6,538 311,483
Unilever NV 5,000 230,301
Unilever PLC 53,700 323,763
-------
865,547
Dimension Stone (0.84%)
Potash Corp. of Saskatchewan, Inc. 8,800 485,650
Drugs (4.50%)
AstraZeneca Group PLC 13,727 $641,688
Novartis AG 568 902,616
Rhodia, Inc. SA 22,760 383,988
Taisho Pharmaceutical Co. 8,000 287,321
Takeda Chemical Industries 6,000 394,688
---------
2,610,301
Drugs, Proprietaries & Sundries (1.67%)
Glaxo Wellcome PLC 33,300 970,449
Electronic Components &
Accessories (1.30%)
Murata Mfg. Co., Ltd. 2,000 287,699
Samsung Electronics 1,400 463,308
751,007
Electronic Distribution
Equipment (3.48%)
Philips Electronics NV 35,766 1,693,675
Spirent PLC 48,000 323,006
---------
2,016,681
Family Clothing Stores (0.58%)
Fast Retailing Co., Ltd. 800 335,712
Fire, Marine & Casualty
Insurance (3.09%)
Royal & Sun Alliance Insurance
Group PLC 132,000 853,795
Zurick Allied AG 1,887 935,339
---------
1,789,134
Foreign Banks, Branches &
Agencies (1.31%)
UBS AG 5,150 756,950
Gas Production & Distribution (1.11%)
BG Group PLC 45,070 290,666
OMV AG 4,060 354,161
-------
644,827
Heavy Construction, Except
Highway (1.65%)
Vivendi 10,800 957,114
Industrial Inorganic Chemicals (3.66%)
Aventis SA 28,968 2,122,897
Investment Offices (1.43%)
Amvescap PLC 52,100 828,574
Life Insurance (5.00%)
AXA 9,440 1,493,100
ING Groep NV 20,700 1,404,871
---------
2,897,971
Miscellaneous Business Services (1.12%)
Brisa-Auto Estradas De Portugal, SA 75,070 649,091
Miscellaneous Investing (1.48%)
Investor AB, Class B 62,250 855,246
Miscellaneous Non-Durable
Goods (2.01%)
Diageo PLC 129,785 1,162,189
Newspapers (3.06%)
News Corp. Ltd. ADR 17,700 $964,650
Publishing & Broadcasting Ltd. 15,300 118,046
United News & Media PLC 48,060 691,202
---------
1,773,898
Oil & Gas Field Services (0.70%)
Petroleum Geo-Services ASA 23,600(a) 404,494
Paperboard Containers & Boxes (1.21%)
Buhrmann NV 24,460 702,241
Periodicals (0.60%)
VNU NV 6,717 348,342
Personal Credit Institutions (0.23%)
Acom Co. Ltd. 1,600 134,890
Petroleum Refining (2.52%)
BP Amoco PLC 151,900 1,457,957
Radio & Television Broadcasting (0.81%)
Carlton Communications PLC 36,697 471,945
Radio, Television & Computer
Stores (0.98%)
Yamada Denki 6,300 566,259
Sanitary Services (1.24%)
Suez Lyonnaise des Eaux SA 4,100 721,195
Security Brokers & Dealers (0.72%)
Nikko Securities Co., Ltd. 42,000 416,804
Soap, Cleaners & Toilet Goods (0.88%)
Reckitt Benckiser, Inc. 45,842 509,398
Special Industry Machinery (0.19%)
Cookson Group 32,920 109,892
Telephone Communication (11.71%)
British Telecommunications PLC 51,300 663,243
Cable & Wireless PLC 46,800 794,944
DDI Corp. 42 404,896
Elisa Communications OYJ 3,300 151,841
Hellenic Telecommunications
Organization SA ADR 29,100 354,656
Helsingin Puhelin OYJ 905 89,008
Jazztel PLC ADR 70(a) 1,837
Nippon Telegraph and Telephone Corp. 24(a) 319,834
Nokia Corp. ADR, Class A 24,510 1,223,968
NTT DoCoMo, Inc. 13 352,630
Telecom Corp. of New Zealand Ltd. 204,840 718,399
Telefonica, SA 6,800 146,664
Telefonica, SA ADR 9,643(a) 617,771
Vodafone Airtouch PLC 234,390 947,432
----------
6,787,123
Total Common Stocks 55,318,443
Principal
Amount Value
Commercial Paper (4.57%)
Personal Credit Institutions (4.57%)
Associates First Capital Corp.;
6.89%; 7/3/2000 $700,000 $699,732
Ford Motor Credit;
6.72%; 7/3/2000 1,950,000 1,949,272
Total Commercial Paper 2,649,004
Total Portfolio Investments (100.02%) 57,967,447
Liabilities, net of cash and receivables (-0.02%) (11,938)
Total Net Assets (100.00%) $57,955,509
(a)Non-income producing security-No dividend paid during the last twelve months.
International Securities Portfolio
Investments by Country
Total Percentage of
Country Value Total Value
Australia $ 1,725,480 2.98%
Austria 354,161 0.61
Canada 1,012,235 1.75
Finland 1,464,817 2.53
France 10,537,079 18.18
Germany 1,615,818 2.79
Greece 354,656 0.61
Israel 515,456 0.89
Italy 523,914 0.90
Japan 7,964,066 13.74
Korea, Republic Of 821,283 1.42
Netherlands 6,430,732 11.09
New Zealand 718,399 1.24
Norway 404,495 0.70
Portugal 649,091 1.12
Spain 146,664 0.25
Sweden 4,176,954 7.20
Switzerland 2,594,905 4.48
United Kingdom 12,690,467 21.89
United States 3,266,775 5.63
----------- ------
Total $57,967,447 100.00%
International SmallCap Portfolio
Shares
Held Value
Common Stocks (91.02%)
Advertising (2.20%)
Mosaic Group, Inc. 205,712(a) $2,499,084
SR Teleperformance 23,771 909,187
----------
3,408,271
Agricultural Chemicals (0.70%)
Zeltia SA 17,900(a) 1,081,002
Air Transportation, Scheduled (1.52%)
Ryanair Holdings PLC ADR 31,338(a) 1,143,837
West Jet Airlines Ltd. 79,600(a) 1,208,772
----------
2,352,609
Bakery Products (0.12%)
QAF 549,000 187,339
Beer, Wine & Distilled Beverages (1.33%)
Hite Brewery Co. Ltd. 47,000 2,065,425
Commercial Banks (1.09%)
HKCB Bank Holding Co. Ltd. 3,058,000(a) 882,647
Koram Bank 134,000(a) 811,193
--------
1,693,840
Commercial Printing (1.27%)
Creo Products, Inc. 86,666(a) 1,971,652
Sato Corp. 50 1,342
---------
1,972,994
Communications Equipment (3.68%)
Elcoteq Network Corp., Class A 96,600 2,125,165
Gilat Satellite Networks 19,100(a) 1,325,063
Pandatel AG 14,136(a) 1,653,176
Telson Electronics Co. Ltd. 55,900 594,081
----------
5,697,485
Communications Services, NEC (3.54%)
Eyretel PLC 909,700(a) 2,878,340
GT Group Telecom, Inc., Class B 95,400(a) 1,508,513
Switchcore AB 104,350(a) 1,094,573
----------
5,481,426
Computer & Data Processing
Services (11.83%)
AIT Group PLC 12,233 226,633
Articon Info Systems AG 12,850(a) 877,033
Baltimore Technologies PLC 17,349(a) 273,247
Biodata Information Technology AG 4,330(a) 1,461,044
C.REL 163,000(a) 209,770
Computershare Ltd. 295,521 1,524,183
Cresco Ltd. 9,300 668,021
Dansk Data Electronik AS - B 1,250(a) 82,721
Enea Data AB 12,500 85,512
F-Secure OYI 15,200(a) 176,450
Grenke Leasing 57,100(a) 1,795,324
Guardian It PLC 43,400 893,565
Lectra Systems 29,711(a) 487,019
LPKF Laser & Electronics 6,500 1,741,518
MaxxCom 192,000(a) 1,036,669
Meta4 NV 20,946(a) 173,680
Morse Holdings PLC 196,400(a) 1,263,653
Orchestream Holdings PLC 327,500(a) 1,576,653
Parsytec AG NPV 6,100(a) 1,374,139
Tele Atlas BV 93,400(a) 1,369,844
Telecomputing ASA 74,390(a) 600,519
Telindus Group-Strip VVPR 2,800(a) 27
Via Net.Works, Inc. 23,800(a) 367,413
VISMA ASA 13,700(a) 69,722
---------
18,334,359
Computer & Office Equipment (1.05%)
Venture Mfg. Ltd. 160,000 1,628,687
Construction & Related
Machinery (3.05%)
Geberit AG-REG 2,990 1,002,143
Palfinger AG 22,600 568,683
Pinguely-Haulotte 77,849 1,626,830
Swisslog Holding AG 3,100 1,525,154
----------
4,722,812
Crushed & Broken Stone (0.20%)
Brandrill Ltd. NPV 508,946 305,582
Deep Sea Foreign Trans. Of
Freight (0.85%)
Frontline Ltd. 107,400(a) 1,319,339
Drugs (3.56%)
CSL Ltd. 109,820 2,178,268
FH Faulding & Co. Ltd. 245,800 1,207,823
Girindus AG 14,900(a) 467,054
Hisamitsu Pharmaceutical 84,000 1,294,873
Nippon Shinyaku Co. Ltd. 37,000 375,927
---------
5,523,945
Eating & Drinking Places (0.70%)
Global-Dining Inc. 1,200 77,123
Matsuya Foods Ltd. 38,400 1,008,950
---------
1,086,073
Electric Services (0.39%)
Energy Developments Ltd. 30,142 176,455
Vestas Wind Systems A/S 11,800 435,175
---------
611,630
Electrical Industrial Appartus (0.33%)
Kontron Embedded Computers AG 5,700(a) 519,076
Electrical Work (0.96%)
Bracknell Corp. 285,200(a) 1,424,394
International-Muller NV 3,956 68,259
---------
1,492,653
Electronic Components &
Accessories (7.82%)
C-Mac Industries, Inc. 37,000(a) 1,748,029
Chloride Group PLC 705,400 2,018,342
Elmos Semiconductor AG 34,400 1,681,750
JIT Holdings Ltd. 866,000 1,512,620
Kinseki Ltd. 9,000 152,687
Micronic Laser Systems AB 67,800(a) 1,383,717
Nihon Denpa Kogyo Co. Ltd. 31,200 1,621,851
Parthus Technologies 308,100(a) 886,223
SOITEC 2,720(a) 638,804
Toshiba Ceramics Co. Ltd. 57,000(a) 477,312
----------
12,121,335
Electronic Distribution Equipment (1.40%)
Austria Technologies & Systemtechnik AG 21,600(a) 1,635,738
JOT Automation Group OYJ 79,900 535,373
---------
2,171,111
Engineering & Architecture (1.17%)
Fugro NV 31,760 $1,819,078
Family Clothing Stores (1.03%)
Giordano International Ltd. 1,052,000 1,599,194
General Industrial Machinery (1.95%)
Koyo Seiko Co. Ltd. 109,000 948,811
Nippon Thompson Co. Ltd. 67,000 1,019,517
NTN Corp. 225,000 963,329
Whatman PLC 29,100 89,541
---------
3,021,198
Industrial Inorganic Chemicals (0.21%)
Air Water, Inc. 74,000 330,816
Industrial Machinery, NEC (1.11%)
CKD Corp. 139,000 1,282,208
Vossloh AG 27,067 446,274
---------
1,728,482
Investment Offices (0.20%)
C. I. Fund Mgmt, Inc. 16,600 314,260
Life Insurance (1.07%)
Industrial Alliance Life Insurance Co. 100,500(a) 1,661,808
Machinery, Equipment &
Supplies (1.67%)
FKI PLC 660,600 2,350,196
Geveke NV 5,150 241,900
---------
2,592,096
Measuring & Controlling
Devices (1.84%)
ERG Ltd. 297,100 2,313,653
Shimadzu Corp. 98,000 545,551
---------
2,859,204
Medical & Dental Laboratories (1.21%)
Unilabs AG 1,747 1,880,152
Medical Instruments & Supplies (1.98%)
Cochlear Ltd. 178,000 3,073,508
Metal Forgings & Stamps (0.50%)
LPG Telecom Holding AB 28,600 782,604
Metalworking Machinery (0.52%)
Mikron Holding AG 1,101 813,191
Miscellaneous Amusement, Recreation
Services (2.46%)
Aristocrat Leisure Ltd. 611,860 2,075,660
SNAI SPA 69,600 1,741,336
---------
3,816,996
Miscellaneous Business Services (0.34%)
GFK AG 10,900(a) 532,880
Miscellaneous Chemical Products (0.60%)
Nichias Corp. 233,000 $931,515
Miscellaneous Electrical Equipment &
Supplies (1.23%)
Kaba Holdings AG, Class B 1,230 1,588,497
Zen Research 137,000(a) 311,107
---------
1,899,604
Miscellaneous Fabricated Metal
Products (0.79%)
Coflexip SA 10,000 1,217,409
Miscellaneous Primary Metal
Products (0.00%)
YBM Magnex International, Inc. 107,000(a) 722
Miscellaneous Transportation
Equipment (1.29%)
IFCO Systems NV 75,300(a) 1,992,218
Motion Picture Distributiion &
Services (0.47%)
Studio Canal 67,350(a) 723,084
Motion Picture Production &
Services (1.49%)
Expand 6,110 556,414
Hit Entertainment PLC 266,700 1,756,345
---------
2,312,759
Motor Vehicles & Equipment (0.69%)
Torotrak PLC 183,800(a) 1,065,717
Motorcycles, Bicycles & Parts (0.74%)
Ducati Motor Holding SPA 448,100(a) 1,153,326
Non-Ferrous Rolling & Drawing (0.78%)
Draka Holdings NV 18,500 1,214,773
Office Furniture (0.69%)
Corporate Express Australia 296,400 1,067,788
Oil & Gas Field Services (1.37%)
TGS Nopec Geophysical Co. ASA 159,620(a) 2,119,562
Periodicals (1.39%)
Informa Group PLC 208,800 2,160,561
Personnel Supply Services (0.58%)
Creyf's NV 17,200 458,360
NIC Corp. 100 1,805
Unique International NV 18,400 442,715
---------
902,880
Photographic Equipment &
Supplies (1.58%)
Gretag Imaging Holding 1,500 289,656
Konica Corp. 253,000 2,152,072
---------
2,441,728
Pottery & Related Products (0.48%)
Maruwa Co. Ltd 18,600 738,339
Professional & Commercial
Equipment (1.31%)
Azkoyen SA 199,800 $1,405,803
Quality Healthcare Asia Ltd. 2,142,000(a) 631,996
----------
2,037,799
Radio, Television & Computer
Stores (0.46%)
Yamada Denki 8,000 719,059
Real Estate Operators & Lessors (1.04%)
Boardwalk Equities, Inc. 170,100(a) 1,607,242
Refrigeration & Service
Machinery (1.46%)
Jenoptik AG 39,300 1,130,178
Munters AB 14,600 178,115
Wedeco AG Water Technology 25,270(a) 956,831
---------
2,265,124
Research & Testing Services (1.26%)
Cambridge Antibody Technology Group 43,290(a) 1,959,550
Residential Building
Construction (0.19%)
Urban Corp. 14,000 292,425
Security Brokers & Dealers (0.89%)
Kempen & Co. NV 13,000 654,237
Van Der Moolen Holdings 12,900 727,110
---------
1,381,347
Special Industry Machinery (2.96%)
Chen Hsong Holdings Ltd. 1,070,000 174,323
Muehlbauer Holding AG 6,557 452,554
Sez Holding AG 1,674 1,537,012
Suess Microtec 64,500(a) 2,423,699
---------
4,587,588
Subdivders & Developers (0.69%)
Singapore Land Ltd. 503,000 1,070,584
Telephone Communication (1.71%)
AAPT Ltd. 96,800(a) 318,502
Cybertron Telekom AG 25,400(a) 598,965
Cybertron Telekom Rights 25,400(a) -
Nera Telecommunications 399,000 747,692
Versatel Telecom International NV 23,400(a) 986,964
---------
2,652,123
Variety Stores (0.03%)
Thanks Japan Corp. 3,700 39,516
Total Common Stocks 141,156,802
Principal
Amount Value
Commercial Paper (10.66%)
Business Credit Institutions (7.91%)
American Express Credit;
6.78%; 7/5/2000 $3,000,000 $2,997,740
6.78%; 7/7/2000 4,275,000 4,270,169
----------
7,267,909
Sheffield Receivables Corp.
6.58%; 7/5/2000 5,000,000 4,996,344
Personal Credit Institutions (2.75%)
Assoc. First Capital Corp.
6.89%; 7/3/2000 4,275,000 4,273,364
Total Commercial Paper 16,537,617
Total Portfolio Investments (101.69%) 157,694,419
Liabilities, net of cash and receivables (-1.69%) (2,617,052)
Total Net Assets (100.00%) $155,077,367
(a)Non-income producing security-No dividend paid during the last twelve months.
International SmallCap Portfolio
Investments by Country
Total Percentage of
Country Value Total Value
Australia $14,241,420 9.03%
Austria 2,803,386 1.78
Belgium 458,386 0.29
Canada 14,981,144 9.50
Denmark 517,897 0.33
Finland 2,836,988 1.80
France 6,158,747 3.91
Germany 17,512,530 11.10
Hong Kong 3,288,161 2.09
Ireland 2,030,060 1.28
Israel 1,325,063 0.84
Italy 2,894,662 1.83
Japan 15,643,051 9.92
Korea, Republic of 3,470,698 2.20
Netherlands 9,884,511 6.27
Norway 4,318,912 2.74
Singapore 5,146,923 3.26
Spain 2,660,485 1.69
Sweden 3,524,521 2.23
Switzerland 8,635,807 5.48
United Kingdom 18,823,450 11.94
United States 16,537,617 10.49
Total $157,694,419 100.00%
Mortgage-Backed Securities Portfolio
Description of Issue Principal
Type Rate Maturity Amount Value
Federal Home Loan Mortgage Corporation
(FHLMC) Certificates (22.06%)
FHLMC5.50% 2/15/2024-3/1/2024 $445,163 $440,767
FHLMC6.00 4/1/2024 88,887 91,428
FHLMC6.50 12/1/2013-8/1/2029 389,432 378,165
FHLMC7.00 6/1/2030 144,251 144,915
FHLMC7.50 11/1/2029 98,215 96,871
Total FHLMC Certificates 1,152,146
Federal National Mortgage Association (FNMA)
Certificates (20.46%)
FNMA6.25 4/1/2026 155,137 156,187
FNMA7.00 8/1/2023 737,763 711,266
FNMA8.00 6/1/2030 201,188 200,892
Total FNMA Certificates 1,068,345
Government National Mortgage Association (GNMA)
Certificates (52.87%)
GNMA I 5.50 6/15/2024 163,952 162,753
GNMA I 6.50 1/15/2024 1,005,646 959,616
GNMA I 7.50 6/15/2023 334,277 317,809
GNMA II 5.50 3/20/2026 156,805 155,277
GNMA II 6.009/20/2023-4/20/2026 904,926 920,323
GNMA II 6.50 10/20/2025 251,332 245,706
Total GNMA Certificates 2,761,484
Principal
Amount Value
Federal Agency Short-Term Obligations (7.75%)
Investment in Joint Trading Account,
Student Loan Marketing Association;
6.57%; 7/3/2000 $404,923 $404,923
Total Portfolio Investments (103.14%) 5,386,898
Cash, receivables and other assets,
net of liabilities (-3.14%) (164,055)
Total Net Assets (100.00%) $5,222,843
